The government on Tuesday said post the abolition of the FIPB, ministries will have to decide on FDI proposals within 60 days of the application and any rejection will need concurrence of the DIPP. India had last month scrapped the 25-year old foreign investment advisory body FIPB as it looks to attract more FDI by providing quick approvals under a single-window clearance system.
In an office memorandum, the Finance Ministry said subsequent to the abolition of the Foreign Investment Promotion Board (FIPB), concerned administrative ministries have been alloted the work of granting approval for foreign investment in the specific sector. The Industry Ministry, in consultation with the administrative ministry, will come out with a detailed guideline for processing of the FDI proposals and ensure a “consistency of treatment and uniformity of approach”.
The Standard Operating Procedure (SOP) shall involve the process of inter-ministerial consultation for the examination of FDI proposals, wherever necessary, it said. “The SOP will also recognise that ordinarily FDI applications, including those related to non resident Indian (NRI)/ Export Oriented Unit (EOU), food processing, single brand retail trading and multi brand retail trading proposals, should be decided in 60 days,” the office memorandum said.
All pending applications with the FIPB would be transferred to the administrative ministry and oversight of the FIPB portal shall be transferred to the DIPP from the Department of Economic Affairs (DEA) within four weeks.
While FDI approval decisions in majority of the sectors have been relegated to concerned ministry, those relating to private security agencies would be decided by the Home Ministry. The DEA will clear proposals of financial services which are not regulated by a regulator or where there is more than one regulator or there is a doubt about the regulator. Any FDI proposal in banks will be approved by the Department of Financial Services.
“FDI proposals by NRIs/EoUs requiring approval of the government will be dealt with by the Department of Industrial Policy and Promotion (DIPP) and the DIPP will continue to be the administrative ministry for this purpose,” it said. Also, application for import of capital goods or machinery shall be handled by the DIPP.
However, applications involving investments from “Countries of Concern”, requiring security clearance as per the FEMA guidelines and FDI policy, shall be processed by the Home Ministry.
While the Home Ministry will only process those applications coming via automatic route but requiring security clearances, cases pertaining to approval route sectors requiring security clearance will be processed by the concerned administrative ministry. Besides, the format of security clearance form has been changed and has been made available on the FIPB portal. The government has asked applicants to upload the new form failing which application will not be entertained.
For FDI application in which there is a doubt about the administrative ministry concerned, the DIPP shall identify the ministry where the application will be processed, it said, adding that the concerned ministry will have to seek Cabinet nod wherever required. “The concurrence of DIPP would be mandatory with reference to the FDI applications which are proposed to be rejected by the competent authority or where approval is proposed by competent authority subject to additional conditions not provided in the FDI policy,” it said.
A joint quarterly review meeting will be undertaken by a committee co-chaired by DEA and DIPP Secretary on pendency of proposals with Government. All past and future litigations and liabilities shall be handled by the administrative department and about 4,500 reference and record files currently with the FIPB secretariat will be transferred to concerned ministry.
Currently, about 91-95 per cent of FDI is coming through the automatic route and only 11 sectors, including defence and retail trading, require the government approval for FDI. Inflow of foreign direct investment into India increased by 9 per cent to USD 43.48 billion in 2016-17.
Foreign investment proposals above Rs 5,000 crore would continue to be cleared by the Cabinet Committee on Economic Affairs. The FIPB was constituted under the Prime Minister’s Office following economic liberalisation in the early 1990s.